Investor Glossary-return on assetsInvestor Glossary-return on assetsInvestor Glossary-return on assetsInvestor Glossary-return on assetsInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Return On Assets

The HTML to link to this page
 

Return on assets is net income divided by total assets. Thus if net income is $100,000 and total assets are $1,000,000, return on assets is 10%. Return on assets is often computed as net income divided by average assets ((beginning assets + ending assets)/2), because net income is generated continually through the period, not only on the last day. Also, note that return on assets calculates the return on all capital, from both creditors and owners -- unlike return on equity, which includes only owners capital. Return on assets is more revealingly, if less efficiently, computed as Net Margin (net income/sales) X Asset Turnover (sales/assets). Because sales appears in both numerator and denominator, the equation reduces to net income/assets, ie, return on assets. The first part of the return on assets equation shows how much profit the company can wring from each sales dollar. The second part of the return on assets equation shows how efficiently the company can generate revenue from the assets it has. Both higher profitability and higher efficiency yield a better return on assets.



Rate this Return on Assets definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: liquidity ratio, annual return, wholly-owned subsidiary, debt service coverage, margin rate, 1031 exchange, covered put, inflation, EBITDA, irrevocable trust, deferred tax, open position, 1035 exchange, ex-dividend date, stock split, labor relations, cancelled check, required rate of return, stock market close, limit order, real GDP, APR, in escrow, quality assurance, FTSE, LIBOR, per diem, FICO score, current ratio, Zero Cost Collar, average price per share, class C shares, deferred revenue, VIX, retained earnings, implied volatility, ex-dividend, dividends payable, option premium, balance sheet, command economy, minority interest, Key Rate Duration, diluted share, phantom income, risk management, 144a, reverse mortgage, 401a


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use